Energy Market Updates

This morning Brent Crude dropped under $50 for the first time in 6 months, and WTI fell below $45/bbl to within $2 of a 6 year low. Shortly after noon, the NYMEX showed ULSD down .0452 cents, and gas down almost 9 (-.0882).

What's going on?

Lackluster economic data out of both China and the US seems to indicate that overall oil demand is unlikely to spike to levels able to compensate for the immense glut of oil we're seeing now. As we've discussed, OPEC and others have kept production at record levels to both retain market share, and attempt to slow production (and therefore competition for market share) by higher cost-of-production nations, most notably, the U.S.

Domestically, S&P Energy stocks dragged that index down in response to falling oil prices. US stock indexes trended downward today across the board on other non-thrilling economic data as well as some major single stock tumbles (Apple, Tyson, Lowe's, etc).Overall data showed consumer spending gains were anemic, labor costs increased, and now we all wait with baited breath for the jobs report due out on Friday.

Across the pond, the Greek stock market re-opened today and promptly tumbled almost 30%, essentially reigniting concerns about the stability of the Eurozone and the odds that the Greek debt deals in their current iterations will solve the ongoing debt crisis. (They ended up rebounding to cap out about a 16% loss on the day)

The data from China this morning was arguably the main catalyst for the drop today, as all eyes were focused on their manufacturing reporting to show a gain, but it instead showed a major slow down. Chinese economic growth had been essentially the last hope for demand ramping up and stemming the price sliding. Traders and Investors have been looking for signs to confirm their hopes of a positive second half of the year in terms of growth, and today's data essentially put those hopes to rest.

At the close, September ULSD dropped -.0584 to 1.5305, RBOB dropped -.0975 to 1.6745. WTI closed out at $45.17. Last prints for Brent are 49.54-50.17 range.

Deja Vu - global oil prices are again creeping higher on increasing friction on the Ukraine-Russia standoff, projected inventory numbers, and Chinese economic numbers suggesting slower growth than anticipated. Didn't we just go through this two weeks ago??

Brent CRUDE hit over $110 Tuesday for the first time since March 4th on increasing concern over long term energy supply impacts of the mounting Ukrainian situation, and concerns of potential Western (US) interventions. Tuesday saw Ukranian troops clash with Russians at an occupied airport in Kramatorsk, about 100 miles from the Russian border - the first armed clash thus far in the ongoing power struggle. Tuesday also saw Ukranian troops headed toward the Russian border, counter to the tens of thousands of Russian troops reportedly stationed there. Concerns over potential Western response pushed stock markets lower, including the German DAX and Russian MICEX and pushed Brent and WTI prices up, with Brent hitting $110 as we mentioned, and WTI gaining to as much as 104.99 ahead of Inventory numbers due out later today.

The primary cited reason for the jumps is the escalations in the Ukraine, but Chinese Economic data is also looking weaker than projected, with economic expansion numbers clocking in at the lowest we've seen in 6 quarters and falling short of the governments stated target of 7.5% growth. On the bright side, the Hariga port in Libya loaded for the first time in July when it was seized and shut down by rebels.

Domestically, US inventories on gas are projected to show draws of up to 1.75 mb in Bloomberg estimates, while CRUDE is expected to show builds, and distillates are projected to be largely stable. It will be interesting to see how pricing plays out if the EIA report pulls the rug out from under the analysts like it did the last week of March.

After starting the early morning in the red, Markets made an about face mid morning as new economic news hit the wires. The Jobs report showed an additional 165,000 jobs were added last month, above the 148k expected. That pushed unemployment down to roughly 7.5%, additionally the magic pencil revised March and February numbers up by a combined 60k jobs. While these are encouraging numbers for the US workforce, most agree that the World market may not be as optimistic. A well supplied market and growing concern over an already fragile European Zone, which today cut forward growth rates, has limited the upside to the NYMEX over the last several sessions. Additionally, China is expected to report sluggish manufacturing rates next week. As the day went on, distillate markets cooled off while gasoline still stayed strong. Look for next week to be much of the same as positions look to be solidified as we move towards the summer driving hype. At the close, Crude added $1.62 to $95.61, HEAT gained .0289 $2.8844, and RBOB jumped .0448 to $2.8254

Once again the NYMEX started off the session well into positive territory with a strong Sunday night open. Much of the gains were attributed to Chinese data released Sunday that showed its Industrial Output rose year over year, signaling stronger demand. But as the day wore on, continued worries about Europe, as the Italian Prime Minister abruptly resigned, appeared to be entering into Traders minds. That fear turned inward as the real concern centers around US distillate demand. Its Common knowledge that inventory levels of distillates are on the very low end of the range, so in the minds of most, the lack of demand is overshadowing the lack of product. Others point that this is just the season to book some profits as traders square up the quarter. I'm pleasantly surprised that we have maintained HO below the $2.95 level, a clear level of support is difficult to define at this time. At the close, Crude fell .37 to $85.56, RBOB was up only 7 points to $2.5981 and HEAT led the charge lower falling .0191 to $2.8962.